IMF Staff Completes 2024 Article IV Mission to Timor-Leste

October 8, 2024

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
  • Timor-Leste’s growth is expected to rise in 2024, supported by an increase in public spending and strong credit growth. From a high level in 2023, inflation has fallen sharply and is projected to continue easing with the moderation of global food prices.
  • A key policy priority is ensuring that Timor-Leste’s substantial savings are best utilized to support development while achieving fiscal sustainability. Improving the composition and quality of public spending would boost growth, while containing overall spending is needed to preserve fiscal sustainability.
  • Promoting private sector development requires well-sequenced structural reforms, and the authorities are rightly prioritizing an ambitious agenda of legal reforms of the financial sector.

Washington, DC: An International Monetary Fund (IMF) team led by Mr. Yan Carrière-Swallow visited Dili during September 25-October 8 to conduct discussions for the 2024 Article IV consultation with Timor-Leste. At the conclusion of the discussions, Mr. Carrière-Swallow issued the following statement:

“Timor-Leste has made impressive progress since its independence. Yet, the economy remains under-diversified and highly dependent on the public sector. The IMF stands ready to continue providing capacity development to assist the government’s development and reform efforts.

“Growth is expected to rise in 2024, supported by an increase in public spending and strong credit growth, and will maintain its momentum in 2025. From a high level in 2023, inflation has fallen sharply and is projected to continue easing with the moderation of global food prices. Risks to the outlook are balanced.

“The draft 2025 budget contains an appropriate increase in spending on capital projects, health, and education, but also an excessive increase in recurrent spending. Large fiscal deficits are expected to persist as spending remains high, requiring excess withdrawals from the Petroleum Fund that will lead to its full depletion by the end of the 2030s. We recommend a 10-year reform scenario that supports economic diversification through structural reforms and gradually reduces fiscal deficits to stabilize the Petroleum Fund.

“We welcome the government’s ambitious financial sector reform agenda to address structural impediments to lending, which is essential for private sector development. We recommend accelerating the issuance of land titles, which would offer a crucial source of collateral to households and businesses seeking credit from banks.

“The team had fruitful discussions with Prime Minister Kay Rala Xanana Gusmão, Minister of Finance Santina Cardoso, Central Bank Governor Hélder Lopes, other senior officials, development partners, the private sector, and civil society. On behalf of the IMF team, I would like to thank the Timorese authorities for their hospitality and excellent cooperation.”

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